Despite recent initiatives across a number of countries to institutionalise the use of economic evaluation in the assessment of new technologies, the evidence suggests that, to date, the impact of economic analysis on health sector decision making in practice has been low. This paper proposes that incentive compatibility problems associated with much of the decision making that economics is meant to inform is a major factor in this. The argument involves recognition that economic priority setting tends to create winners and losers and, as a consequence, any change in the status quo will tend to impose direct costs on those decision makers required to implement them. At the same time, such individuals often lack any stake over the benefits of such decisions. In this type of institutional setting, the prospects of achieving the necessary cooperation for implementation are likely to be low, particularly if it is viewed as being part of a \"one-off\" initiative. Conventional health economic analysis and agency theory are limited in the extent to which they can address this problem. Such forms of analyses tend to lack an appreciation of broader institutional characteristics, including the prevailing values and norms within a decision making context that are potentially important in promoting cooperation and thus the prospects of implementation.
Applied Health Economics and Health Policy (2003) 2 (1) 17-24